Alcatel hammered after profit warning

PARIS: French telecom equipment maker Alcatel delivered bruised investors a

profit warning twinned with a fresh restructuring plan on Wednesday, sending its

shares down by over 25 per cent to a record low.

In an unexpected move, worsening an already black day for technology

investors, chief financial officer Jean-Pascal Beaufret said the company would

post an operating loss in 2002. As recently as April, Alcatel, one of the

world's top three equipment suppliers, said it was expecting an operating

profit.

The restructuring is the latest in a series of moves to rein in spending and

will reduce costs by 12 per cent in 2003, the company said. Alcatel shares

plummeted as much as 27 per cent to 6.83 euros, wiping three billion euros off

the market value of a company whose shares have now fallen 60 per cent this

year.

The market had already battered by news that US telephone and data services

firm WorldCom was restating its 2001 and first quarter 2002 results to show net

losses after uncovering improper accounting. The DJ Stoxx pan-European Tech

index fell seven percent at the time.

Alcatel, whose rivals include Ericsson and Nortel Networks, is already in the

process of slashing 30,000 jobs over 2001 and 2002. It gave no details on the

jobs impact of the latest plan. Alcatel said it expected sales in the second

quarter to be practically flat compared with the first, while operating profit

would improve as forecast by about 100 million euros, compared with the first

quarter.

It said the new plan would reduce its quarterly break-even point to below a

quarterly average of 4.0 billion euros of sales in 2003 and entail a

restructuring charge of 1.2 billion euros in 2002.

As for the current year, Alcatel said its quarterly break-even point that had

previously been established at 4.7 billion euros for 2002 had been brought down

to 4.5 billion.

(C) Reuters limited.